US companies added 158,000 jobs in October, far higher than expected, according to the latest survey from payrolls processor ADP.

Analysts had been expecting the private sector to add 88,000 jobs in October.

The figure comes ahead of Friday's nonfarm payroll report, which also includes government jobs. The bureau of labor statistics' monthly jobs tally has become a flashpoint in the 2012 election with both president Barack Obama and rival Mitt Romney parsing the report to bolster their campaigns. Friday's will be the last before election day.

ADP's figures came amid further evidence of a pickup in the economy. The labor department announced there were 363,000 initial claims for jobless benefits in the latest week, fewer than the 369,000 economists expected.

Manufacturing also expanded at a faster pace in October than expected, according to the Institute for Supply Management's (ISM) factory index. The index climbed to 51.7 last month, its highest level since May and up from 51.5 in September. Economists had predicted a dip to 51 for October, 50 is the dividing line between growth and contraction.

"The job gain is broad based and across industry," said Mark Zandi, Moodys analytics chief economist. "It feels like the jobs market is holding its own."

Moodys has been advising ADP on its closely watched report after criticism of the accuracy of its numbers. The survey is very closely followed but has been a sometimes unreliable indicator of the government figures. This is the first report since the survey was overhauled with Moodys' help.

Zandi said September's number had been revised up to 114,000 from 88,000 after adding in more retail jobs. That would bring the number exactly in line with last month's nonfarm figures.

Zandi said he suspected a slowdown in government hiring could lead to October's non-farm figure coming in at between 130,000 and 140,000.

ADP calculates that the US added 23,000 new jobs in construction last month, another encouraging sign of recovery in the housing market, said Zandi. Some 81,000 of the jobs were in large businesses – most of those, 69,000, in businesses with over 1,000 employees. Small businesses added 50,000 jobs.

Zandi said that the construction industry figures boded well for a more robust recovery in the jobs market after months of weak growth. However he warned that political uncertainty over the fiscal cliff – the year-end expiration of Bush-era tax cuts and the imposition of draconian spending cuts – was weighing on hiring.

"It's hiring that's the problem, layoffs are very, very low," he said.

ADP's report comes as outplacement specialist Challenger, Gray & Christmas reported a 41% jump in the number of planned job cuts in October.

According to its latest survey the number of firms planning layoffs surged after a 22-month low in September. Despite last month's sharp increase, layoffs for the year are still well below last year's pace.

John Challenger, chief executive officer of Challenger, Gray & Christmas, said there were signs of trouble ahead.

"The final three months of the year tend to see heavier downsizing activity as companies make year-end adjustments to meet earnings goals and to prepare for the new year. Certainly, the deluge of weak third-quarter earnings reports that resulted from declining sales here and abroad does not bode well for workers as 2013 approaches," he said.